Thursday, July 13, 2000

Merger talk turns to Delta

Northwest-American tie could ease the way

Enquirer wire services and The Cincinnati Enquirer

        The proposed merger between American and Northwest airlines could ease the way toward an eventual coupling of Delta Air Lines and Continental Airlines.

        But that prospect also could be just more cause for federal antitrust regulators to reject all proposed airline mergers, including the latest, American's $3.7 billion offer for Northwest.

        American and Northwest operate a total of 22 daily flights from Cincinnati/Northern Kentucky International Airport. Local air service is dominated by Delta, which controls about 87 percent of the flights and 93 percent of the departing passengers.

        The Washington Post reported Wednesday that American, the nation's sec ond-largest carrier, has offered $44 a share for Northwest, which is seeking more than $100 a share.

        An accord between those carriers could involve the sale of Northwest's controlling stake in Continental to Delta, the newspaper said. Government filings show that Northwest controls more than 55 percent of the voting stock in Continental. Delta's purchase of that could be the first step toward a Delta-Continental merger.

        Merger discussions among U.S. airlines stepped up after United Airlines' parent company said in May that it would buy US Airways for $11.6 billion. By the end of June, Delta's CEO Leo Mullin told USA Today that Delta had been in talks with Continental.

        Analysts think that American and Atlanta-based Delta Air Lines must pursue acquisitions to remain competitive with United, the nation's largest carrier.

        “The probability of a deal being announced this summer is very high,” Samuel Buttrick, an analyst with PaineWebber, said. “The probability of it being consummated is substantially less. ... The highest hurdle in any major airline merger is the Department of Justice.”

        Analysts have said carriers are jumping on the acquisition bandwagon in order to force the Justice Department to reject all possible airline mergers. If they allow one, they are likely to allow all — and that could leave the U.S. skies with only three to four major carriers.

        United formally asked the Justice Department June 16 to review its purchase of US Airways. That led to speculation this week that an American-Northwest deal was imminent because federal law gives the Justice Department 30 days — until July 16, in this case — for a review, but the department can extend the deadline.


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